Zohr gas field: Egypt’s megaproject holds a lot of promise
Eni’s Zohr natural gas field began production at the end of 2017, taking advantage of a huge reserve in the Mediterranean Sea. Molly Lempriere asks, could this supergiant turn things around for Egypt’s struggling gas sector and bring the country closer to energy self-sufficiency?
In December 2017, Eni’s Zohr colossal natural gas field began production. It has an estimated reserve of 30 trillion cubic feet and could eventually be capable of producing enough natural gas for Egypt to once again meet its own energy demands.
Egypt has some of the biggest natural gas resources in the world, but production has dropped over the last few years following the 2011 Egyptian revolution. Some 1846.3 billion cubic metres (bcm) of natural gas lie under Egypt and its waters, but they have been underexploited due to the political and economic turmoil.
Zohr marks an important step towards energy self-sufficiency, and the rebuilding of Egypt’s economy. But how much can one oilfield do?
“Initial production has been 350 million cubic feet per day, and this is expected to increase in June to a billion cubic feet per day, and finally to reach its full capacity of 2.7 billion by 2019.”
Zohr: the supergiant of the Mediterranean
Zohr is not only Egypt’s biggest ever natural gas field, but the biggest ever found in the Mediterranean. It was discovered in 2015 more than 150km off the coast, and within the 3,752km² Shorouk Block, part of the Egyptian Exclusive Economic Zone (EEZ).
The field has started production in a record amount of time, taking just 28 months from discovery to first gas. Pipelines have been fitted to transport the gas straight to Port Said City. Eni has invested $10bn in the deepwater project and owns 60%, whilst Rosneft owns 30% and BP 10% of the field.
Initial production has been 350 million cubic feet per day, and this is expected to increase in June to a billion cubic feet per day, and finally to reach its full capacity of 2.7 billion by 2019. Such a quantity of reserves has led Zohr to be labelled a supergiant field, its 30 trillion cubic feet of gas being more than all the reserves of Israel and Oman put together.
Eni's field alone is expected to save Egypt $1bn annually in gas imports, and work as part of an updated energy system in Egypt. Siemens is investing €8bn in building three new high-efficiency natural gas power plants, which will add 14.4GW to the grid. Zohr, along with several other gas projects coming online in 2018, will feed these new plants and reinforce Egypt’s energy security.
“It will completely transform Egypt’s energy landscape, allowing it to become self-sufficient and to turn from an importer of natural gas into a future exporter,” said Eni’s CEO, Claudio Descalzi. “I would like to thank the Egyptian authorities and all our partners in this incredible project for their all-important contributions and the whole Egyptian petroleum sector which provided full support to achieve Zohr project in a record time.”
“By 2013, Egypt was struggling to pay foreign oil and gas companies, and had built up arrears of $6bn to $8bn.”
From exporter to importer: how the Egyptian revolution affected energy supplies
In 2011, marches and demonstrations began in Cairo as people took to the streets in protest of then President Hosni Mubarak and his autocratic government. Angry about poverty, unemployment and corruption, protestors demanded a change of government. The initially peaceful movement soon turned violent; people were killed and thousands were injured as protestors clashed with security forces.
After 18 days, Mubarak officially resigned after 30 years in power, but political turmoil continued for years. The unrest that followed had a devastating effect on foreign investment, which led to a foreign currency deficit. By 2013, Egypt was struggling to pay foreign oil and gas companies, and had built up arrears of $6bn to $8bn.
Production began to dip and demand continued to grow, turning Egypt from an exporter to an importer of natural gas in just a few years. In 2014, Egypt produced just 48.7bcm, whilst it consumed 48bcm. In 2015, it officially became dependent on LNG imports to meet supply. In the 2015/16 fiscal year, Egypt bought 89 cargoes of LNG from international suppliers, at a total cost of $2.2bn.
Since the revolution, the energy system has struggled to meet demand. Power cuts became common by 2013, especially in the summer months when temperatures reach over 40°C and air conditioning units drive up electricity usage dramatically. Failure to ensure a constant supply of power was a key reason for the replacement of the Muslim Brotherhood President Mohamed Mursi in 2013.
Currently, Egypt produces about 5.1 billion cubic feet of gas per day, but consumes six billion cubic feet of gas a day. This is used predominantly for electricity and accounts for 65% of Egypt’s energy mix.
“Together these projects will play an important role in supporting and reshaping Egypt's energy sector.”
Self-sufficiency is within reach: Increasing production with Zohr, Nooros and North Alexandria
Securing energy supply, increasing gas production and reassuring foreign investment have become priorities for current President Abdel-Fattah El-Sisi. Progress is already being made, and production rose in 2017 for the first time in years. BP’s North Alexandria project was key to this, as it came online early in 2017, boosting production by 0.7 billion cubic feet per day from 2016. However, this was not enough to meet Egypt’s energy deficit and imports remained essential to avoid blackouts.
Zohr is therefore significant, not simply for its size but for its ability to bring Egypt closer to meeting its energy needs. Several other fields are currently planned to come online this year, including Eni’s Nooros field. Together Egypt’s natural gas output is expected to increase by 50% in 2018, and then by 100% in 2019.
“The development of Zohr in a record time has brought a new critical source of energy to the Egyptian market. BP’s two other current major projects in Egypt – Atoll and the second phase of the West Nile Delta project – will bring further new gas resources into production,” said Hesham Mekawi, regional president, BP North Africa. “Together these projects will play an important role in supporting and reshaping Egypt's energy sector.”
His sentiments have been mirrored in the optimism of the current government. It is now expected that such increases in production will mean Egypt will be entirely self-sufficient in natural gas by the end of 2018.
“The fields of Zohr, North Alexandria and Nooros are among the most important projects that will increase natural gas production...and will contribute to natural gas self-sufficiency by the end of 2018,” petroleum minister Tarek El Molla said.
Egypt is also seeking to bolster its energy system through diversification, and held its first competitive solar auction in December last year. It aims to increase renewables to account for a fifth of general energy demand by 2022.
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